Shares describe a range of different financial tools, but in their simplest format, they refer to the stocks which are offered by every publicly traded company and which are available for general purchase on the financial markets which we know as the ‘stock markets’. All companies listed on financial indices will have shares which can be bought or sold by traders.

What can affect the movement of stocks?

What can affect the movement of stocks?

What can affect the movement of stocks?

Every stock has its own value, dependent on how the company is currently valued by the markets. Although stock prices are rarely completely static, significant movements in a stock price are often down to a number of specific factors.

1. Companies Earning

1. Companies Earnings

Four times a year all publicly traded companies release their earnings for the previous quarter. As well as providing details about the company’s performance, they can also serve as a strong indicator as to whether a company’s current strategy is working or not. Larger companies may well have their performance tracked by financial analysts who will issue predictions as to the upcoming results of the firm in question (the firm’s stock price can also move once the general prediction is made known.) It is not uncommon to see a scenario in which a company makes a decent profit but falls short of expectations and so sees its stock price subsequently fall. Similarly, a company might announce a loss for the quarter, but if the loss is less than that predicted then the firm’s stock price might rise.

2. Analyst Ratings

2. Analyst Ratings

Market analysts don’t just provide predictions on a company’s upcoming earnings, they also provide constant ratings on many major stocks, within the following categories; Sell, Underperform, Hold, Outperform and Buy. ‘Sell’ and ‘Buy’ are obvious – a clear indication in either direction. ‘Hold’ implies that the analyst believes that the stock and company in question will show similar rates of movement to the market in general or to other stocks in the same market sector. ‘Underperform’ suggests that the analyst thinks that the stock will do slightly worse than ‘Hold’, whilst ‘Outperform’ suggests that the analyst believes that it will do slightly better.

However, analysts’ ratings should not be accepted in blind faith by traders. Firstly, there is no guarantee that the analysts will be correct. Secondly, analyst unanimity is rare, which means one analyst’s ‘outperform’ might well be another’s ‘Underperform’, for example. Analyst ratings can be useful, but usually it’s best to use these in conjunction with one’s own research.

3. General Industry News

3. General Industry News

Many publicly traded companies focus on a specific sector, such as technology, food or mining. Sometimes general news about a specific financial sector can have a chain reaction on all companies in that sector. For example, news that copper supply currently outweighs demand is likely to have an effect on mining companies in general and those that focus on copper in particular. Sometimes, however, news about one particular company in a sector can have a knock-on effect on other companies in that same sector.

For example, Tesco’s tough 2014 saw its share price drop drastically, but many of its direct competitors in the UK supermarket industry also saw their stock prices slump. In part this was due to a general malaise which investors perceived within the UK supermarket industry, but which Tesco’s actions and the subsequent fall-out helped to highlight.

Other news which can influence the stock price of a company includes takeover speculation (whether this turns out to be correct or not), changes in top company personnel and significant shifts in strategy announced by the firm in question.

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